Australia’s future can be bright if we work together to navigate three defining challenges in our economy, which the Albanese government has now inherited from our predecessors.
The first is skyrocketing inflation, putting extreme pressure on family budgets and increasing input costs for businesses, which the independent Reserve Bank of Australia has said is an important factor in its decisions regarding interest rate rises.
The second, falling real wages, is a consequence of almost a decade of the deliberate undermining of pay and job security now coming home to roost in the form of a full-blown cost-of-living crisis.
The third is a budget heaving with more than $1 trillion in debt, with almost nothing to show for it because it’s chock-full of rorts and waste.
There is no use mincing words or tiptoeing around these challenges – they are serious if not dire, and they can no longer be ignored. All three can be traced back to before the pandemic – debt had already doubled, growth was below trend, productivity and business investment were weak, wages were already stagnant before Covid – and so it will take some time to turn things around.
While Wednesday’s National Accounts confirmed solid underlying demand and a tight labour market, they also confirmed that our economy is weaker than what was expected before the election.
Quarterly gross domestic product growth of 0.8 per cent was much lower than what was forecast by Treasury in the Pre-election Economic and Fiscal Outlook, which was 1.8 per cent for the March quarter.
When the parliament returns, I will update Australians on these challenges in a blunt and upfront way in the form of a detailed Ministerial Statement informed by Treasury. No government, new or otherwise, can flick a switch and make $1 trillion in debt, or a cost-of-living crisis, disappear. But the hard work needs to start now, and it has.
Finance Minister Katy Gallagher and I have already begun going through the budget line by line to see whether wasted and rorted dollars can be directed towards responsible investments in people and their economy.
The audit of rorts and waste will be key to this effort.
Our goal is to grow the economy without adding to inflationary pressures, to get real wages moving again, and to have something to show for all this debt by improving the quality of the budget and getting more value for money.
Our budget in October will be all about implementing our commitments in a way that serves these key objectives.
The Jobs Summit this year and the White Paper after that will help us maintain a focus on wages, living standards, job security and skills.
One of our first actions has been delivering on our commitment to make a submission to the Fair Work Commission so that the heroes of the pandemic aren’t rewarded with a cut to their real wages. After consultation, I will soon commission a review of the Reserve Bank’s setting of monetary policy, which will include its relationship with fiscal policy, with a final report due back to me in 2023.
The outcomes of the Productivity Commission five-yearly update will help inform the second budget in May.
An earlier-than-usual and bolstered Intergenerational Report will be brought down in the 2023-24 financial year, fulfilling a commitment to deliver them more regularly in the middle year of each parliamentary term.
Each of these milestones will be an opportunity to explain our economic challenges to Australians and bring them together around solutions.
That’s been the theme of my initial consultations so far: with every state and territory treasurer; with the Reserve Bank Governor and heads of the major regulators; and with the heads of the major business organisations and unions.
This week I’ll be speaking with my counterparts in key countries around the world, because our domestic challenges cannot be entirely separated from uncertainty abroad.
Anthony Albanese, his economic team, our new cabinet and government all want to engage Australians in a big national conversation about the economy and the opportunities ahead, and work together to address the challenges we’ve inherited.
Jim Chalmers is the Treasurer of Australia.
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